California’s Unlawful Net Neutrality Law

It’s hard for state legislators to get attention from the voters. Most Americans can’t name the people who represent us in Congress, and almost nobody can name their state legislators. With term limits in effect in fifteen states, state legislators have an increased need to seek higher office but no name recognition to run on.

Add in the need to identify as part of the Trump Resistance in blue states, and it becomes clear that legislatures can’t always be concerned with such niceties as constitutional limits on their authority. Policy reasons aside, these two facts alone explain why term limited legislatures would want to enact symbolic measures that grab headlines for their authors.

California hopped aboard the Resistance bandwagon last Sunday when governor Brown signed his legislature’s net neutrality bill despite its dubious effect on consumers and its apparent illegality. California is a wonderful place, but its legislature does not have the authority to ignore the U. S. Constitution’s Commerce and Supremacy Clauses.

The Internet is Interstate Commerce

The Internet is obviously intertwined with interstate (and even global) commerce. Amazon and Walmart are enormous retail powers, and they both engage in commerce in every part of the US through the Internet. Similarly, Google and Facebook sell Internet ads to business across the nation and Apple and Microsoft sell Internet-oriented products all over the world.

Telecommunications is a global business, and so is broadband Internet service. Consequently, the regulation of ISPs is a federal prerogative delegated to the FCC by the 1934 Communications Act.

The FCC updated its Internet regulations in December, and in so doing it expressly forbade states from enacting their own regulations on ISPs. Proponents of the California law are telling journalists they’ve found a loophole that devolves regulatory power to the states, but no such loophole exists.

Weak Defenses of Legislative Overreach

The California law was largely written by Professor Barbara van Schewick, director of the Silicon Valley-based Stanford Center for Internet and Society. Her defense of the law lacks conviction:

SB 822 is firmly grounded in the law. While the FCC’s 2017 Order explicitly bans states from adopting their own net neutrality laws, that preemption is invalid.

An agency that has no power to regulate has no power to preempt the states, according to case law. When the FCC repealed the 2015 Open Internet Order, it said it had no power to regulate broadband internet access providers. That means the FCC cannot prevent the states from adopting net neutrality protections because the FCC’s repeal order removed its authority to adopt such protections.

The claim that the Restoring Internet Freedom order said the FCC had “no power to regulate broadband internet access providers” is nothing but spin. The order imposed new transparency regulations on ISPs at the same time that it voided the agency’s self-granted power to police ISP practices that failed to violate any actual regulations.

Restoring Internet Freedom Does Relinquish FCC Authority

Paragraph 232. Just as the Commission did in the Open Internet Order, we rely on section 257 of the Communications Act as authority for the transparency requirements we retain. Section 257(a) directs the Commission to “identify[] and eliminat[e] . . . market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services, or in the provision of parts or services to providers of telecommunications services and information services.”

While the Commission did say that it does not regard Section 706 – the legal basis claimed by the FCC’s invalid 2010 Open Internet Order – as an “independent grant of authority” to impose regulations on ISP traffic management practices, it did not say 706 was without power. In fact, the FCC argued that 706 supports the preemption of state laws attempting to re-impose net neutrality:

Footnote 731. We are not persuaded that preemption is contrary to section 706(a) of the 1996 Act, 47 U.S.C. § 1302(a), insofar as that provision directs state commissions (as well as this Commission) to promote the deployment of advanced telecommunications capability. See, e.g., NARUC Comments at 2; Public Knowledge Reply at 27. For one thing, as discussed infra, we conclude that section 706 does not constitute an affirmative grant of regulatory authority, but instead simply provides guidance to this Commission and the state commissions on how to use any authority conferred by other provisions of federal and state law. See infra Part IV.B.3.a. For another, nothing in this order forecloses state regulatory commissions from promoting the goals set forth in section 706(a) through measures that we do not preempt here, such as by promoting access to rights-of-way under state law, encouraging broadband investment and deployment through state tax policy, and administering other generally applicable state laws. Finally, insofar as we conclude that section 706’s goals of encouraging broadband deployment and removing barriers to infrastructure investment are best served by preempting state regulation, we find that section 706 supports (rather than prohibits) the use of preemption here.

The RIF order did not do what van Schewick says it did.

Please Let There be Case Law!

Faced with the fact that Section 706(a) of the Communications Act gives the FCC authority to preempt state laws that impose unnecessary regulations on the Internet economy, van Schewick and other supporters of the California law claim that case law supports their position: “Courts have consistently held that when the federal government lacks authority to regulate, it cannot preempt states from regulating.”

But the RIF order had no impact in the FCC’s authority to regulate the Internet or to choose a fundamentally deregulatory policy for it. In either case, states are required to abide by its regulations as long as they are in effect. This displeases the Resistance, so they’re looking for ways to hedge.

Congresswoman Eshoo and others have claimed the FCC created a void that must be filled by the states:

The void created by the FCC when the Commission walked away from net neutrality is vast and we’ve already witnessed examples of some of the worst practices that can take place without clear Net Neutrality laws, including the throttling of Santa Clara County Fire’s data services during the largest fire in California history.- Eshoo

The Trump administration’s decision to sue the state of California just for stepping in to fill the void created when Ajit Pai wrongly took away these congressionally granted rights is unfortunate and hypocritical in the extreme. – Matt Wood, Free Press

Gigi Sohn also claims that California simply reinstated the 2015 Open Internet order when it actually went far beyond it:

[SB 822] completely reinstates the 2015 Open Internet Order, including protections for interconnection and against anticompetitive and anti-consumer zero rating practices.

In fact, the provisions requiring free interconnection, favored by transit operator Cogent Communications, and banning free data were not parts of the 2015 Order and are neither favored by nor beneficial to consumers. All of this is simply unlawful.

Bottom Line

California’s SB 822 net neutrality law is a symbolic measure that doesn’t stand a chance in court. If this were not the case, advocates would be happy to cite specific case law that supports their positions.

Instead, they prefer to misstate the terms of the RIF order and tout the claim that most consumers are overjoyed with California’s legislative action. The Justice Department has already filed suit to block the law, so this is the time for supporters to bring forward the case law they claim supports their position.